Bloomberg

Bloomberg | Quint is a multiplatform, Indian business and financial news company. We combine Bloomberg’s global leadership in business and financial news and data, with Quintillion Media’s deep expertise in the Indian market and digital news delivery, to provide high quality business news, insights and trends for India’s sophisticated audiences.

Trump Said His Fuel Economy Re-Do Would Help Workers. Will It?

(Bloomberg) -- President Donald Trump framed his decision to revisit fuel-economy regulations enacted by his predecessor as a move to help American auto workers.

“We’re going to work on the CAFE standards so you can make cars in America again,” he told auto workers in March 2017 outside of Detroit, referring to the Corporate Average Fuel Economy. “We’re going to help the companies, and they’re going to help you.”

But according to some experts -- and even the agencies that last week recommended easing Obama-era fuel economy mandates -- those workers may be less in-demand if the proposal takes effect.

Zoe Lipman, advanced transportation director from BlueGreen Alliance, a partnership between labor unions and environmental advocates, said that U.S. automakers have invested $63.8 billion in U.S. facilities and have promised another $12.4 billion through 2020 -- much of it to meet the environmental dictates. At least 1,200 U.S. factories and engineering facilities in 48 states — and 288,000 American workers – are building parts and materials that boost fuel efficiency, according to the group.

Technology Jobs

“Unfortunately stepping away from strong standards cuts billions of dollars in investments in new technologies and the jobs that go with it,” she said.

The analysis by the National Highway Traffic Safety Administration and Environmental Protection Agency that accompanied the proposed revamp found the auto industry would need fewer man-hours to achieve the recommended standards. Under the plan, fleet wide fuel efficiency requirements would stop getting tougher after 2020 rather than continue to grow each year under the terms put in place by former President Barack Obama.

The study projected that the industry’s labor needs would rise through 2030 under both scenarios, but more slowly under Trump’s. That translated to roughly 50,000 to 60,000 fewer “job-years” a measure of labor need, to meet the lowered standards in each year from 2021 through 2030 than under the Obama administration’s standards, roughly 4 percent of expected labor needs in those years, according to the analysis.

Without higher fuel economy requirements, carmakers and parts suppliers would need to spend less to develop and manufacture newer technologies that improve fuel economy, translating to a reduction in labor needs, the analysis said.

Those declines outweigh additional labor needs associated with higher sales spurred by lower vehicle prices that the agencies expect from the change, the analysis found.

Operating Costs

Susan Helper, a former chief economist of the Commerce Department during the Obama administration who’s a professor at Case Western Reserve University in Cleveland, said the negative effects are likely understated.

Cars may be cheaper up front for consumers but they’ll use more fuel and cost more to operate under the easier standards, eating into consumer pocketbooks and hurting demand, she said. Longer term, walking away from higher fuel economy standards puts the U.S. at risk of losing high-value engineering work to China and Europe, which are marching ahead with tougher standards, she said.

“That’s really dangerous in terms of future competitiveness and making America great again,” said Helper.

Labor Dynamics

To be sure, NHTSA and the EPA make several assumptions, and cautioned that the labor dynamics could play out differently. For example, sales may see larger gains than the analysis projects, meaning job gains could be greater, it said. In the proposal, the agencies note that changes in labor time may not directly translate to actual jobs.

The Transportation Department says that the fewer job-years should not be construed as meaning up to 60,000 jobs will be lost in the U.S. because the analysis measured labor need, not actual employment, and the jobs impacted could be overseas. The Department also believes that additional labor needs would largely be fulfilled by overtime, meaning losing additional man hours may not lead to job cuts.

That still affects workers in question, said Erica Groshen, a former commissioner of the U.S. Bureau of Labor Statistics and during Obama administration.

“A decline in hours does equate to a decline in earnings, either in the form of wages or in the form of a job,” said Groshen, who’s now a visiting senior scholar at Cornell University’s Industrial and Labor Relations School.

Auto parts suppliers provide much of the efficiency-improving technologies that modern automobiles use to meet standards.

Those companies would lose some $20 billion in sales of efficiency technologies between 2021 and 2025 if fuel economy standards are frozen at 2020 levels, even under low fuel prices, according to a study commissioned by Ceres, a nonprofit that works with large companies on sustainability issues.